1 / 29

Corruption and Agricultural Market Intervention

Corruption and Agricultural Market Intervention. Sirilaksana Khoman Chair, Economic Sector Corruption Prevention National Anti-Corruption Commission (NACC).

yonah
Download Presentation

Corruption and Agricultural Market Intervention

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Corruption and Agricultural Market Intervention Sirilaksana Khoman Chair, Economic Sector Corruption Prevention National Anti-Corruption Commission (NACC) Presented at the course: MORS D68 Ethics and Executive Leadership, Sasin Graduate Institute of Business Administration, Chulalongkorn University, Wednesday 30 October 2013

  2. Types of governance issues • Straight-forward, petty corruption • Complex and sophisticated networks, plundering the nation’s resources • Example: Rice pledging scheme

  3. Paddy Pledging Scheme: Policy evolution Original Paddy pledging scheme at warehouse – provided credit to farms of 80-90% of market price to delay sale by farmers (like pawning) 1993-4 started use of pledging ‘receipt’ 2000-2001 Thaksin increased pledging price above market price – increased budget – transforming scheme into price support scheme 2001-2002 increased coverage to off-season rice crop 2006-2007 Surayudh government decreased price to close to market price 2008 Samak government increased price to highest level at 14,000 Baht for off-season rice In spite of rapid fall in price, Somchai and Abhisit governments maintain pledging price above market price: main crop 2008-09 at 12,000 Baht and off-season crop 2009 at 11,800 Baht

  4. Comparison of pledging price and market price of jasmine rice Pledging price higher than market price for the first time 01/02 Study period 2005/6

  5. พันล้านบาท Loss for2005/06 crop; 5.2 million tons paddy

  6. Agencies involved and quantities of paddy in the process 90 per cent of pledges not redeemed.

  7. Rent Seeking P differential Farmers • inflation of registered production • increase acreage for rice/reduction of other crops • substitution of rights of other farmers • increased number of crops to 7-8 crops/2 years • put pressure on governments to continue program • higher cost • greater pollution • competition for water resources Consequence Milling profits Rice mill Free rice to siphon • Capacity expansion/Siloto 90 million tons paddyIncreased investment from 0.8 million Baht to 1.6 m per mill during 1987-2005 • Lobbying to be included/pledging across district • siphoning of rice for illicit sale • substution of farmers’ rights/ using rice from Cambodia, Myanmar and Laos • Rice mills in the program no longer know how to compete ‘Rent-seeking activities’ and corruption 7

  8. consequence • huge investments in warehouse construction/ return in 2 years • illicit sale of rice • exchanging low quality for high • excess warehouse capacity • unfair advantage of large exporters • lobbying/kick-backs • collusion Inflated rent Warehouse Siphoning of rice Bid price lower than export price exporters ‘Rent-seeking activities and corruption Govt official “Surveyors” 8

  9. Corruption and benefit-sharing (1) Collusion in bidding among exporters (2)Contracts favouring those in the scheme: 5-6 months after bidding to pay (3) Contract amendments between Govt Warehouse and President Agri Trading, winner of the export contract on 6 May2004; standard clause: 5% deposit changed to 1% (4) At time of export, govt paid another $20 per ton to ‘prepare rice for export’

  10. (5) Amendment of contract No. คชก.ขข.02/47 ลว. 18 May2004removing export requirement (6) Policy change that favoured one export company that became the largest exporter

  11. Innovation in corruption policy In early 2004 President Agri Trading, a newcomer, won the bid to buy 1.68 million tons of rice from the govtat prices above market price, thereby possessing the largest amount of rice of all the exporters:2.2 million tons A few months later, the govt announced the pledging price for the new season paddy at 10,000 Baht(higher than market price) Consequently market price shot up – other exporters could not compete with PAT. Many had to buy rice from PAT

  12. Evidence of probable insider information

  13. Recipients Source: Nipon (2010) 2005-2006 loss of 19 billion Baht: Distribution of economic rent: 13 13

  14. Beneficiaries are mostly well-to-do farmers in irrigated areas in the Central and lower Northern regions Richest 10% of farmers received 20 % of the benefits Poorest 10% received 1.7 % Farmers with pledges above 200,000 Baht received 59.7%in 2008-9 season Farmers with pledges below 40,000 Baht received 2.7% in 2008-9 season 14 14

  15. Top 2 largest exporters received economic rent of 2.641 billion Baht (for one crop) Collusion becomes easy Remaining 13% 20% # 3 and # 4 59% Largest two exporters 15

  16. Rice production, export and estimated domestic consumption in 2009 Possible profit of 25 billion Baht (conservative estimate)

  17. Bureaucracy Politicians B C or P B1 B2 C1 C2 P3 Notes: B = bureaucracy, C = capitalists, P = politicians, N = non-politicians P1.2 P2.2 P2.3 P1.1 B1.1 B1.2 B1.3 C3 C4 P2.1 N1.2.1 N1.2.2 N2.2.1 N2.2.2 Flows of Network Relationships in Thailand

  18. Rivalry between Clans/ ‘Puak’ or Sub-Clans, Choosing Clan Affiliation Fighting each other to control the resources or to be promoted higher in the clan Clan A Clan B Providing services and political support to the patron in the sub-clan Providing resources to the client in his own sub-clan A1 A2 B1 B2 choose choose People choose clans according to the perceived benefits which could depend on member size and resources of the clan The poor and the under-privileged who are not accepted into any clan are left without resources and protection People with independent source of power

  19. In a nutshell: the 6 C’s Constitution Concentration of political power Crisis of 1997 deCentralisation Civil Service reform Corruption

  20. What can be done? • Membership of the WTO’s GPA? • Ratification of the UNCAC; membership in OECD Anti-Bribery Convention? • Integrity pacts with private sector, encouraging integrity pacts among professional and business associations, eg. medical suppliers, construction, supply chain, involving civil society. • Pro-active, pre-emptive anti-corruption action – intercepting questionable projects

  21. Targeting corruption-friendly policies, measures, practices • Intervention schemes in agricultural markets • Targeting creation of artificial monopolies • Licensing requirements, registration practices, permits, • encouraging use of technology to reduce contact, promoting competition • Evidence-based transparency index

  22. Vigilance on conflicts of interests • Data base • Disclosure requirements • More positions included • Use of technology • Streamlining forms • Business associates • Recommendations regarding appointments of officials and prosecutors to state enterprise boards • Strengthening legislation?

  23. Amendment of anti-corruption law • Clarification and penalties • Provincial offices • Whistle-blower protection • Anti-money-laundering powers • Plea bargaining • Statute of limitations • Public procurement requirements/procurement legislation

  24. NACC ACT 2011: Article 103(7),(8): procurement Publication of reference prices and method of calculation Disclosure of accounting statements for contracts designated by the NACC Monitoring by the NACC

  25. Design of anti-corruption measures taking into account the structure of patron-client networks/creation of monopoly rent Strengthening of conflict of interest laws? Incentives to make whistle-blowing worthwhile? Direction 25

  26. NACC Preventive investigation at the policy formulation stage • Mega projects • ‘NGV’ buses • 3G telecommunication • 350 billion Baht flood prevention project • Suvarnabhumi airport, second phase • Transport infrastructure 2 trillion Baht • Agricultural intervention policy • Rice, longan, cassava, natural rubber, sugar cane and sugar, milk

  27. More aggressive measures • “unusually rich” • Asset disclosure • MPs removed from office

  28. Greater reliance on technology Asset disclosure – database linkage Encouraging use of technology in government agencies – business registration, licensing and permits, etc. (greater convenience for business and reduces opportunities for corruption) Monitoring of monopoly elements Role of regulator and operator Initiatives regarding procurement

  29. Measures for Good Government and Transparency • Checks and Balances: • Independent and effective judiciary • Independent and effective specialized • anti-corruption agency/unit • Decentralization with accountability? • Accountability of Political Leadership: • Disclosure of parliamentary votes • Transparency in party financing • Asset Declaration, Conflict of Interest Rules Good and Clean Government • Civil Society: • Freedom of information • Public hearings of draft laws • Monitoring by media/NGO’s • School Curriculum • Competition & Economic • Freedom: • Competitive restructuring • of monopolies • Regulatory simplification Private Sector Partnership: . CSR, codes of conduct . Anti-corruption pact • Public Administration and Public Finance: • Meritocratic civil service, codes of conduct • Transparent, monetized, adequate remuneration • Accountability in expenditures (Budget, Audit, Procurement) • Perception index of good service by agency/service 29

More Related